<p>
 A Long Strangle is an options trading strategy that involves the simultaneous buying of an out-of-the-money put and an out-of-the-money call with the same underlying stock and expiration date. Similar to a Long Straddle, the Long Strangle has unlimited profit and limited risk, and can be applied if traders think the underlying asset will become volatile and move significantly in either direction. It differs from Long Straddle, however, in that the call strike is above the put strike.
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<pre class="python">price = np.arange(700,1000,1)
# Suppose the undelying price at time 0 is 830
k_call = 870 # The strike price of OTM call
k_put = 795 # The strike price of OTM put
premium_call = 8 # premium of call option
premium_put = 10 # premium of put option
# payoff for the long call
payoff_long_call = [max(-premium_call, i-k_call-premium_call) for i in price]
# payoff for the long put
payoff_long_put = [max(-premium_put, k_put-i-premium_put) for i in price]
payoff = np.sum([payoff_long_call, payoff_long_put], axis=0)
plt.figure(figsize=(20,15))
plt.plot(price, payoff_long_call, label = 'Long Call')
plt.plot(price, payoff_long_put, label = 'long put')
plt.plot(price, payoff, label = 'Long Strangle')
plt.legend(fontsize = 20)
plt.xlabel('Stock Price at Expiry',fontsize = 15)
plt.ylabel('payoff',fontsize = 15)
plt.title('Long Strangle Payoff',fontsize = 20)
plt.grid(True)
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<img class="img-responsive" src="https://cdn.quantconnect.com/tutorials/i/Tutorial04-long-strangle.png" alt="long strangle strategy payoff"/>
<p>
 From the payoff plot, the most that you can lose in a Long Strangle is the total premium you pay for holding the long position of both options. The maximum loss occurs when the stock price falls between the strike price of two options, in which case both options are worthless at expiration. The maximum gain of Long Strangle is unlimited for upside move because a stock's price has no maximum threshold.
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